Sunday, July 27, 2008

The Pendulum of Governmental Activism

Friday's Wall Street Journal featured a comprehensive analysis of the ebb and flow of activist government in U.S. history, "Unraveling Reagan: Amid Turmoil, U.S. Turns Away From Decades of Deregulation."


The piece is deceptively titled, I think.

the article correctly notes a deep shift in government policy toward deregulation and the relaxation of antitrust in the Reagan years, in areas like defense and entitlements government's role expanded during that time. What the story's really getting at, I would argue, is how the public philosophy shifts over time from periods of private interest to periods of public purpose. This the formulation of the late historian Arthur Schlesinger, Jr., in The Cycles of American History (1986).

Oftentimes, crises of wrenching tumult in the economy and society force a realignment in the public philosophy toward a new period of political activism and social obligation. Schlesinger was writing during the age of Reagan, and through both Democratic and Republican adminstration's since the late-1980s, we have not seen a shift to Schlesinger's hypothesized era of public purpose.
Are we heading into a new era now, with the acesssion of a new era of activism and governmental responsibility under a possible Democratic adminstratin in 2009?

The housing and financial crisis convulsing the U.S. is powering a new wave of government regulation of business and the economy.

Federal and state governments alike are increasingly hands-on in their effort to deal with failing businesses, plunging house prices, worthless mortgages and soaring energy prices. The steps add up to a major challenge to the movement toward deregulation that has defined American governance for much of the past quarter-century since the "Reagan Revolution" of the early 1980s. In fact, some proponents today of a bigger oversight role for government are Republican heirs to the legacy of President Reagan....

Already, the Federal Reserve has dialed up its scrutiny of Wall Street investment banks, placing officials inside the giant firms and weighing in on their capital requirements, after taking the unusual step of offering tens of billions of dollars in emergency loans. The Fed has also agreed to lend money to Fannie Mae and Freddie Mac, potentially giving the agency more oversight of the two giant housing-finance companies as well.

At the same time, state utility commissions are re-establishing control over power companies that they ceded during earlier waves of deregulation. The Education Department is taking a step toward nationalizing the market for student loans, after private lenders abandoned that business.

The debate over Washington's hand in the economy is at the heart of the presidential campaign. Both major-party candidates are endorsing proposals to create new, Federal Reserve-style commissions to limit greenhouse-gas emissions and decide how to spend billions of dollars on energy-efficient technology....

The degree of change will depend on who occupies the White House next January. Sen. Barack Obama, the presumed Democratic candidate, has talked about a sharp increase in taxes on wealthy Americans, and a windfall-profits tax on oil companies. Republican rival Sen. John McCain would cut taxes on corporations.
I thought about the question of an expanding public sector this afternoon, while reading Ross Douthat and Reihan Salam's, Grand New Party: How Republicans Can Win the Working Class and Save the American Dream.

Douthat and Salam, while making the case that the GOP must shift from a near-exclusive focus on social issues and national security to concern for the political-economy of working class constituencies, they also note that periods of public reform work best when they harness the nation's traditional moral conservatism and the blue-collar work ethic of responsiblity and social stakeholding:

These voters were receptive to economic populism (as the success of George Wallace in '68, and then Ross Perot a generation later, made clear), but they weren't particularly receptive to the tax-and-transfer redistributionism that the Democrats of the 1970s and '80s were associated with, because it seemed primarily aimed at taking money out their pockets and handing it out to the underserving poor.

Blue-collar workers were the
working class, after all, and the genius of the New Deal had been to use government power to help those who helped themselves - to offer a helping hand to people clambering up the ladder, rather than lavishing subsidies on the indigent. If you had a job, in the New Deal dispensation, you received Social Security benefits. If you saved for a home, you earned a home-mortgage deduction. If you worked hard and played by the rules, you received a pension, medical care, and a large enough salary that your wife could afford to stay at home with the kids.

Lyndon Johnson's Great Society programs, by contrast, often eliminated the coercive and moralistic element from government spending, and as a result, working-class voters felt themselves to be subsidizing a growing, failing welfare system that cost them money and seemed to undermine their values into the bargain. As a young Republican strategist put it as early as 1969, the "Democratic Party fell victim to the ideological imperatives of a liberalism which had carried it beyond the taxing of few for the benefits of many (the New Deal) to programs taxing the many on behalf of the few."
So, our dilemma for the present era of rising political activism is coming shape of rived governmental power: Will a potential Democratic administration next year preserve traditional conceptions of working-class moralism, or will the failing big-government of the Great Society era reemerge, with an additional propulsion from the postmodern, one-worldist sensiblities of Barack Obama and his affinity to maching-style politics and "progressive" ideological socio-economic reengineering?

Graphic Credit: Wall Street Journal

(Postscript: Douthat and Salam do not provide a footnote for that unnamed "young Republican strategist," but it sounds like Kevin Phillips, who published The Emerging Republican Majority in 1969).